Why as a nation were we outraged with Starbucks…but not Amazon?

£167bn makes income tax the government’s main area of revenue. It contributes to the £648bn total of incoming receipts. This compares with £732bn which is the government’s total expenditure. The gap is bridged with £84bn of borrowing. So how does Starbucks fit into all that? It is only one company after all.

When reports emerged in 2012 showing that the coffee giants had paid little to no tax the British public reacted with venom. There was national animosity, protests and many chose to boycott them and are continuing to do so. This was admirable and moving – voting with your feet actually gave the British people real power in this instance and it gave Starbucks serious PR issues. So much so that they offered voluntary tax payments of $16.8 million in 2013 and $16.8 million this year.

Their actions were not illegal though and if we are honest with ourselves they were also repeated by many other international companies. So what did Starbucks do so wrong that made us single them out? This is a tricky question to answer. They were one of the first to be exposed (unlucky them!). They are one of many coffee chains where we can get our coffee from. The media did an excellent job of painting them as capitalist demons. And, we hadn’t had a good cause to shout about for a while. It was a lot to do with timing but it was also a lot to do with our narrow knowledge of multinational tax management.

So, we made our stand and did ourselves proud. But, then we failed to boycott any other companies in great numbers. Why was that? We came to our senses. Our tax knowledge increased by extended media exposure and we realised that one company would make it wrong, but several companies all taking advantage of a loop hole just makes it opportunistic and naughty at worst! There are other reasons why we chose to retire our boycotting ways:

1) It is not actually against the law and we are beginning to realise where the real fault here lies! With the people that make the laws. The same people who shout at the tops of their voices for us to do something about it when massive companies go about not breaking those laws! If somebody got let off for speeding on a regular basis we wouldn’t blame the individual for speeding but the person for not enforcing the law and making our roads safer!

2) We made a difference with Starbucks and pulled attention to the issue in hand – we were able to go to Costas instead for a while so it didn’t disturb our routine – and now the media, the House of Commons and hopefully HMRC can do their bit to make lasting changes to prevent tax evasion. Amazon and Google are simply irreplaceable – why in god’s name would we want to boycott something that we cannot replace and have come to rely on! Nobody beats Amazon’s prime delivery and what search engine could possibly replace google. That’s just a silly idea!

3) Margaret Hodge, chair of the Public Accounts Committee of the House of Commons, keeps calling for us to boycott Amazon. This underlines the hypocrisy of the situation entirely. An MP who makes laws is asking us to punish a company who legally evaded HMRC’s increased powers to tackle tax dodging. We vote for these people, we rely on them to serve and protect us, and then they turn around and tell us to clear up the mess they created as though we are a nation of debt collectors acting on our government’s behalf. Erm – No Margaret! Think of a better way to collect the taxes you feel the country is owed by Amazon. We don’t particularly like siding with politicians anyhow.

4) Starbucks brought everything into the open and we were suddenly updated with the convoluted way that multinational companies were allowed to control their taxes. Perhaps the best way to make this point is in the words of the man who finally got to grips with Starbucks stateless income planning and explained it in an impressive and heavy read entitled ‘Through a Latte, Darkly: Starbuck’s Stateless Income Planning’. After summarising Starbucks avoidance strategies Edward D. Kleinbard comments:

‘The above observations are speculative, but that makes my basic point. Why should the presumption be that the basic international tax structure of a multinational company – particularly one that chooses to divide its integrated business into watertight compartments located in different jurisdictions, with the apparent purpose of minimizing U.K. tax – not be transparent to the UK, House of Commons, HMRC, IRS, or any other tax authority with an interest in the matter? The game of 20 tax questions is tedious and frustrating; tax authorities have limited time and resources, and the real consequences of those elaborate structures often require analyzing the tax and financial accounting rules of multiple jurisdictions.’

For the full report by Edward follow this link.

So not to put too finer point on it but I think it is fair to say that the British public were initially outraged at a tax dodging franchise and is now feeling a familiar but different emotion in response to other companies joining those revelations. One of disappointment in the powers that are supposed to manage taxes. These big companies may not pay enough corporation tax but they do invest, create hundreds of jobs and fuel a struggling economy. They have taken a liberty and we are not impressed but we are even less impressed with the people responsible for imposing taxes. Who are we to vent our rage at clever tax management – hell we don’t relish paying our taxes to a government that spends plenty on their personal expenses but cannot sort the National Health Service out!

And at the end of the day a few billion from these multinational companies in taxes is not going to solve the 84bn in borrowing that the government needs to break even. We have four very good reasons to avoid boycotting any more companies but we still have excellent grounds to boycott the government….if only we could!

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